Iraq to give Western companies oil rights: report

Last Updated: Monday, January 8, 2007 | 12:29 PM ET

CBC News

The Iraqi government plans to introduce a law that will give Western oil companies rights to the country's huge oil reserves, a British newspaper says.

The government is drafting a law based on "production sharing agreements [PSAs]," which will allow major oil companies to sign deals of up to 30 years to extract Iraq's oil, the Independent on Sunday reported.

Iraq has the second largest oil reserves in the world, the U.S. government says.
(Nabil al-Jurani/Associated Press)

It said it had been given a copy of the draft law from last July, and the draft has not been changed significantly since then.

Under PSAs, a country retains legal ownership of its oil but gives a share of profits to the international companies that invest in infrastructure and operation of the wells, pipelines and refineries, the newspaper said.

Critics say the agreements will be bad news for Iraq because they guarantee profits to the companies while giving little to the country. With 112 billion barrels, Iraq has the second largest reserves in the world, the U.S. government says.

Platform, a London-based pressure group that seeks to minimize the impact of oil companies, says on its website that Iraq endorsed production-sharing agreements last fall, just as Russia sought to undo a similar deal it signed in the period of turmoil after the Communist regime collapsed.

Citing published Russian reports, Platform said Russia has realized it signed a bad deal to develop a gas project, which allocated the risk to the government and the profit to the private sector.

"Russia realized the mistakes it made by signing PSA contracts only when it was too late. It remains to be seen whether Iraq follows the same course," the group said in October.

Attack on Iraq motivated by oil?

Platform's Greg Muttitt said the U.S. government, international oil companies and the International Monetary Fund had been asked to comment on the draft Iraqi legislation, but many members of the Iraqi parliament have not seen it. 

The Independent said Iraq may adopt PSA contracts because it is in a weak bargaining position.

The legislation, if passed as in the draft the Independent was given, would stoke claims that the U.S.-led attack on Iraq was motivated by oil.

The U.S. has denied that. For example, in 2003, then Secretary of Defence Donald Rumsfeld called the idea "utter nonsense."

Speaking to the Arab TV network Al-Jazeera, he said: "We don't take our forces, and go around the world and try to take other people's real estate or other people's resources, their oil. That's just not what the United States does."

The Independent said signing PSA deals would be a first for a major oil-exporting country. Saudi Arabia and Iran, the two leading exporters, both control their oil industries tightly through state-owned companies.